Home Brokers & Agents Concerning Off-MLS Exchanges, A Few Thoughts…

Concerning Off-MLS Exchanges, A Few Thoughts…

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Groucho-Marx
You want me to join a club, you say?

So the last few weeks have been all sorts of interesting, and busy. Sold a house, bought a house, packed, moved, went to Inman, immediately went crazy waiting for Comcast to install the Internetz (who missed three appointments), then went to talk to a group of Government Affairs Directors, and then finally spoke to a group of Association executives and leaders out in California….

Sorry for not posting more, but things appear to be settling down, so… I should be able to get back to something approaching normal.

While there are lots of things in the news (e.g., Realtor.com, Realogy’s ass-kicking Q2, etc.), I thought the most interesting topic to look at today is the emerging issue of off-MLS listings (or pocket listings) and the networks that are springing up everywhere these days like kudzu (or sunflowers after a refreshing shower, depending on your perspective).

Bottom line, for those who don’t care to wade through thousands of words:

Pocket listings are likely here to stay, cannot be stopped, and are the symptoms of a far deeper underlying problem at the MLS and the Association of REALTORS. But that’s what they are: symptoms, rather than the disease.

For those inclined for more, let’s dive in.

The Fear of the Off-MLS Listing

At the California Association of REALTORS Strategies for Thought Leadership event I just attended, I had the chance to listen to a panel of distinguished brokerage leaders talk about some of their biggest challenges and fears. One of the panelists, who runs a large brokerage operation in Northern California, said that his biggest fear was the rising trend of more and more transactions happening off-MLS, and the networks of top producers that were springing up to enable them.

He directly echoed my concerns from this post of mine from May, that when half a billion dollars of transactions are done off-MLS, and some third of listings and deals may never hit the MLS, the housing market forecasts and trend reports and market analyses that CAR’s economic team puts out may be completely inaccurate. He thought that he and his agents had very little idea of what the real market picture was because of the off-MLS transactions.

In my May post, I wrote that if the MLS is no longer reliable as a data source, everything else will fall down. Well, guess what? There be cracks in that thar foundation, son.

Rage Against the Machine

A couple of weeks earlier, I found time (difficult enough as that was) to sit in and listen to a panel of MLS executives, a brokerage executive, the CEO of a private agent network (which does in fact enable off-MLS listings), and the attorney for MRIS (nation’s second largest MLS)¬†CRMLS (nation’s largest MLS) discuss the phenomenon. [Editor: My apologies to MRIS; as David Charron, the CEO, pointed out in the comments, I confused the largest MLS with the second-largest….]

Obviously, three of the four panelists thought that these off-MLS listings were the worst thing to happen to mankind since Yoko Ono broke up the Beatles. (Fine, okay, maybe not that bad, but… still… very bad.) The CEO of the private network, of course, spent his entire time talking about how professional the members of his network were, how the off-MLS listings did not harm the seller, etc. etc.

Brad Bjelke, the general counsel of MRIS¬†CRMLS, actually suggested that there may be criminal liability attached to a real estate agent who utilizes off-MLS listings. Jail time, son, if you sell your client’s house for full asking price before it hits the MLS. And it was strongly suggested that selling a property off-MLS is more or less buying yourself a civil lawsuit.

Eh… I don’t know. Maybe. But that seems like a pretty high bar to clear for any prosecutor, especially if the client in question agreed to such “pre-marketing” or off-MLS marketing arrangements and was satisfied with the result. As for civil liability…

Quick Detour…

What made that notion of criminal liability so… meh… was the fact that earlier that week, I had the opportunity to participate in the first Hear It Direct consumer panel event at Inman. At said event, I heard a buyer from California say that he chose his agent specifically based on that agent’s ability to access off-MLS listings. I heard him say that he looked for that capability when interviewing buyer’s agents.

And I have a confession to make. When I was selling my house in Sugar Land, I specifically asked my listing agent to pre-market the home before it hit the MLS. He advised me that I may not get as much money for the house if I did so, but… here’s the thing. Selling a house while you’re living in it is a pain in the ass, especially when you’ve paid to have it staged. (And who sells a house without staging? Idiots, that’s who.) For weeks on end, it was like living in a museum. Anytime there was a showing, we had to vacate, take the kids to a movie, or whatever. And I knew that. So if we had gotten an offer within 10% of the asking price, we were fully willing to accept it just so we didn’t have to live like test subjects and have to deal with the PITA factor.

You think I’d have sued my agent for pre-marketing after that? More likely that I’d have bought him a gift for helping us avoid the enormous hassle of selling a house.

With that in mind…

Stopping the Off-MLS Listing

It seems obvious now that pretty much every MLS executive in the country is now at least thinking about, if not focusing on, the question of how to stop these off-MLS listings and transactions. We know that Northwest MLS up in Seattle passed draconian rules prohibiting the practice. I suspect we’ll see more such rules in the near future from a variety of MLSs.

I don’t see it.

I base that judgment on a meeting I had with one David Faudman, the CEO of Top Agent Network. That would be this gentleman here:

The thing that struck me the most about David is that he’s not a bomb-thrower. He’s not exactly a twentysomething hipster from Silicon Valley who wants to disrupt the industry. He’s a longtime broker and agent himself, who told me the following:

  • These private networks have been around forever, probably since the dawn of time. Brokers and agents network with each other all the time. (In fact, one could argue that the entire “MLS” itself was born out of brokers hanging out with each other down at the local watering hole and exchanging notes on properties for sale.)
  • David had been running this sort of “private network” on an email list for years. All that has changed, he says, is the communication technology.
  • David said that about 70% of the messages/traffic on Top Agent Network have nothing to do with listings. They have to do with the sort of advice, tips, and trading of information that one might find on something like Raise the Bar or Real Estate Apps and Technology or what-have-you.
  • The most interesting thing he told me is that the reason why Top Agent Network exists, the reason why his members join and love the community, is that they don’t want to work with REALTORS who suck. [NOTE: I have since received email from David Faudman asking to clarify that the wording here is mine, and mine alone. He would put it thus: “…they prefer to work with more experienced agents.” Again, my apologies if anyone thought David had said those actual words; they are the embellishments of a somewhat feisty blogger.]

Now, jump ahead to the CAR event I just attended.

Speaker after speaker (myself included) made the point that the Big Bad Unspoken Problem of the industry is that far too many agents, far too many REALTORS, simply suck. Jerry Matthews, a longtime consultant to the industry and hardly a bomb-thrower, told stories from focus groups he conducted. One agent had to work with an agent who didn’t know how to fill out an offer form. She told us about one agent who was confused about “that thingy with all the pictures in it” — yep, that would be the MLS. That agent was and remains a REALTOR, a member of the National Association of REALTORS, whose preamble to the Code of Ethics talks about zealously maintaining and improving the standards of their calling.

One of Jerry Matthews’ focus group participants had a novel solution for dealing with incompetence: he paid the other agent $1,000 just to go away, so he can make sure that the transaction would actually close, and do so smoothly.

Is it any wonder that these top agent networks are springing up everywhere?

The Other Shoe…

One might wonder, as I did, given that these private networks have been around for years and years… why are we hearing about this problem now?

The biggest reason, of course, is the insane no-supply seller’s market we’re in. But the other major reason is that technology has not stood still — because technology never stands still.

The basic set of hardware and software that run the MLS was, once upon a time, beyond the reach of any but the largest companies. Server farms are expensive. Industrial-strength routers are pricey, and difficult to manage. Database software can cost tens of thousands of dollars per CPU, and are difficult to program. Creating programs that can search databases, allow the adding/editing of property data, and run reports including photographs was difficult.

In 1999, maybe, when Prince was still partying it up.

In 2013, my $400 iPhone has more memory and faster processor than the $4,000 Sun Microsystems server I was ordering for my company in 1993. Thanks to cloud computing and managed hosting, all you need is a checkbook (and not that large a bank account) to setup a pretty robust, protected, backed-up database with Amazon S3. Creating software that lets people add/edit simple property details and add photos? Does your city have a Craigslist?

MLS technology has not advanced appreciably in twenty years, and today, it is easily possible for any little group of real estate agents who want to share listings with each other — and only with each other — to setup a “private MLS”.

Back during the whole IDX=Syndication debate I was having on this here blog, I wrote that brokerages — especially large brokerages — might look at the whole syndication debate and decide that they might pull out of IDX as well. Bilateral syndication agreements between two or three large brokerages make sense, and the technology to set that up is simple and cheap.

Well, seems to me that while the brokerages might have dithered, their agents went right ahead and did just that. More or less.

It Cannot Be Stopped, Merely Contained…

Some folks are realizing that the off-MLS thing can’t be stopped. So they’re taking steps to contain the problem, and control it to some extent.

One executive, who shall remain nameless (unless he decides to reveal himself), told me at Inman that his MLS is going to roll out a “pre-marketing” feature to subscribers. That would allow agents to put the listings into the MLS without it going out to the Web, to IDX, etc. etc. But it would still be in the MLS.

Trying to co-opt the sentiment behind guys like Top Agent Network and stealing their thunder is a strategy… but without further changes, I’m not sure how effective that would be.

If the core motivation for these elitist private groups is that they don’t want to work with incompetent agents… how does a MLS pre-market feature address that? The only way is to allow the creation of private networks within the MLS. Good luck getting that past the Board of Directors. (Meanwhile, Zillow Rentals — a very fine MLS platform if I’ve ever seen one — allows precisely that creation of private networks….)

The Real Solution?

Eh, who knows. I’m just one guy, with a loud mouth, and a bunch of opinions. I’m sure some of y’all are thinking what many REALTORS like to think: “You ain’t never sold a house, homeboy, so just sit down and eat a big bowl of STFU.” That’s cool — I’m happy to do that. But my not mentioning these things won’t change the fact that a significant chunk of the real estate agent population simply don’t want to have to deal with the majority of licensees and REALTORS because they suck too much.

As Jerry Matthews (I say again, not a bomb-thrower) said, the real solution involves changing the whole notion of the industry and the Association from being inclusive to exclusive. Go check out his Galt Guild proposals if you have time.

But I would modify that slightly.

The MLS must be inclusive, if it is to be meaningful. Having data on 60% of the transactions does no one any good. The MLS has to be not only inclusive, but comprehensive.

The Association, on the other hand, must be exclusive if it is to be meaningful and valuable. Remember, this is the organization whose charter starts with “Under all is the land.” This is the organization that is premised upon zealously maintaining and improving the standards of practitioners, not the MLS.

Therefore, the only real answer must involve the de-linking of the Association from the MLS in some way that allows each entity to fulfill its core mission and core value. All of the data on the one hand, and not all of the practitioners on the other hand.

Yeah, I know. That seems fanciful. Association without the MLS???!! You’ll go bankrupt overnight!!11!BBQ!!

I’m working on that precise issue, and I hope to have something more to share on that front professionally soon. But until then, until there are some real results to report… might I recommend that y’all think about the problem and the solutions some more?

Your views, as always, are welcome.

-rsh

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